diff --git a/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableMaterializeCase.kt b/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableMaterializeCase.kt
new file mode 100644
index 00000000000..477a58324c2
--- /dev/null
+++ b/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableMaterializeCase.kt
@@ -0,0 +1,29 @@
+fun box(): String {
+    testMaterialize()
+    return "OK"
+}
+
+/* TESTS */
+
+// PTV is in producing position (materialize-case)
+fun testMaterialize() {
+    val arg: UserKlass = UserKlass()
+    build {
+        var temp = arg
+        temp = materialize()
+    }
+}
+
+/* REQUIRED DECLARATIONS */
+
+class Buildee<CT> {
+    fun materialize(): CT = UserKlass() as CT
+}
+
+fun <FT> build(
+    instructions: Buildee<FT>.() -> Unit
+): Buildee<FT> {
+    return Buildee<FT>().apply(instructions)
+}
+
+class UserKlass
diff --git a/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableYieldCase.kt b/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableYieldCase.kt
new file mode 100644
index 00000000000..81015a1e457
--- /dev/null
+++ b/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableYieldCase.kt
@@ -0,0 +1,33 @@
+// IGNORE_BACKEND_K1: ANY
+// ISSUE: KT-63816
+// REASON: unexpected red code in K1 (see corresponding diagnostic test)
+
+fun box(): String {
+    testYield()
+    return "OK"
+}
+
+/* TESTS */
+
+// PTV is in consuming position (yield-case)
+fun testYield() {
+    val arg: UserKlass = UserKlass()
+    build {
+        var temp = materialize()
+        temp = arg
+    }
+}
+
+/* REQUIRED DECLARATIONS */
+
+class Buildee<CT> {
+    fun materialize(): CT = UserKlass() as CT
+}
+
+fun <FT> build(
+    instructions: Buildee<FT>.() -> Unit
+): Buildee<FT> {
+    return Buildee<FT>().apply(instructions)
+}
+
+class UserKlass
diff --git a/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/InsideLocalClass.kt b/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/InsideLocalClass.kt
new file mode 100644
index 00000000000..060e8bc46eb
--- /dev/null
+++ b/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/InsideLocalClass.kt
@@ -0,0 +1,46 @@
+fun box(): String {
+    testYield()
+    testMaterialize()
+    return "OK"
+}
+
+/* TESTS */
+
+// PTV is in consuming position (yield-case)
+fun testYield() {
+    val arg: UserKlass = UserKlass()
+    build {
+        class LocalClass {
+            init {
+                yield(arg)
+            }
+        }
+    }
+}
+
+// PTV is in producing position (materialize-case)
+fun testMaterialize() {
+    fun consume(arg: UserKlass) {}
+    build {
+        class LocalClass {
+            init {
+                consume(materialize())
+            }
+        }
+    }
+}
+
+/* REQUIRED DECLARATIONS */
+
+class Buildee<CT> {
+    fun yield(arg: CT) {}
+    fun materialize(): CT = UserKlass() as CT
+}
+
+fun <FT> build(
+    instructions: Buildee<FT>.() -> Unit
+): Buildee<FT> {
+    return Buildee<FT>().apply(instructions)
+}
+
+class UserKlass
diff --git a/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ThroughGenericFunctionCall.kt b/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ThroughGenericFunctionCall.kt
new file mode 100644
index 00000000000..da19dc460c2
--- /dev/null
+++ b/compiler/testData/codegen/box/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ThroughGenericFunctionCall.kt
@@ -0,0 +1,40 @@
+fun box(): String {
+    testYield()
+    testMaterialize()
+    return "OK"
+}
+
+/* TESTS */
+
+// PTV is in consuming position (yield-case)
+fun testYield() {
+    val arg: UserKlass = UserKlass()
+    build {
+        yield(id(arg))
+    }
+}
+
+// PTV is in producing position (materialize-case)
+fun testMaterialize() {
+    fun consume(arg: UserKlass) {}
+    build {
+        consume(id(materialize()))
+    }
+}
+
+/* REQUIRED DECLARATIONS */
+
+class Buildee<CT> {
+    fun yield(arg: CT) {}
+    fun materialize(): CT = UserKlass() as CT
+}
+
+fun <FT> build(
+    instructions: Buildee<FT>.() -> Unit
+): Buildee<FT> {
+    return Buildee<FT>().apply(instructions)
+}
+
+class UserKlass
+
+fun <T> id(arg: T): T = arg
diff --git a/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableMaterializeCase.kt b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableMaterializeCase.kt
new file mode 100644
index 00000000000..e86aa77e6e1
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableMaterializeCase.kt
@@ -0,0 +1,31 @@
+// FIR_IDENTICAL
+// CHECK_TYPE_WITH_EXACT
+// DIAGNOSTICS: -ASSIGNED_BUT_NEVER_ACCESSED_VARIABLE
+
+/* TESTS */
+
+// PTV is in producing position (materialize-case)
+fun testMaterialize() {
+    val arg: UserKlass = UserKlass()
+    val buildee = build {
+        var temp = arg
+        temp = materialize()
+    }
+    // exact type equality check — turns unexpected compile-time behavior into red code
+    // considered to be non-user-reproducible code for the purposes of these tests
+    checkExactType<Buildee<UserKlass>>(buildee)
+}
+
+/* REQUIRED DECLARATIONS */
+
+class Buildee<CT> {
+    fun materialize(): CT = null!!
+}
+
+fun <FT> build(
+    instructions: Buildee<FT>.() -> Unit
+): Buildee<FT> {
+    return Buildee<FT>().apply(instructions)
+}
+
+class UserKlass
diff --git a/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableYieldCase.fir.kt b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableYieldCase.fir.kt
new file mode 100644
index 00000000000..dbc4a31d627
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableYieldCase.fir.kt
@@ -0,0 +1,33 @@
+// CHECK_TYPE_WITH_EXACT
+// DIAGNOSTICS: -ASSIGNED_BUT_NEVER_ACCESSED_VARIABLE
+
+// ISSUE: KT-63816
+// REASON: unexpected red code in K1
+
+/* TESTS */
+
+// PTV is in consuming position (yield-case)
+fun testYield() {
+    val arg: UserKlass = UserKlass()
+    val buildee = build {
+        var temp = materialize()
+        temp = arg
+    }
+    // exact type equality check — turns unexpected compile-time behavior into red code
+    // considered to be non-user-reproducible code for the purposes of these tests
+    checkExactType<Buildee<UserKlass>>(buildee)
+}
+
+/* REQUIRED DECLARATIONS */
+
+class Buildee<CT> {
+    fun materialize(): CT = null!!
+}
+
+fun <FT> build(
+    instructions: Buildee<FT>.() -> Unit
+): Buildee<FT> {
+    return Buildee<FT>().apply(instructions)
+}
+
+class UserKlass
diff --git a/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableYieldCase.kt b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableYieldCase.kt
new file mode 100644
index 00000000000..460cc668004
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ByAssignmentToALocalVariableYieldCase.kt
@@ -0,0 +1,33 @@
+// CHECK_TYPE_WITH_EXACT
+// DIAGNOSTICS: -ASSIGNED_BUT_NEVER_ACCESSED_VARIABLE
+
+// ISSUE: KT-63816
+// REASON: unexpected red code in K1
+
+/* TESTS */
+
+// PTV is in consuming position (yield-case)
+fun testYield() {
+    val arg: UserKlass = UserKlass()
+    val buildee = <!NEW_INFERENCE_NO_INFORMATION_FOR_PARAMETER!>build<!> {
+        var temp = materialize()
+        temp = arg
+    }
+    // exact type equality check — turns unexpected compile-time behavior into red code
+    // considered to be non-user-reproducible code for the purposes of these tests
+    checkExactType<Buildee<UserKlass>>(<!DEBUG_INFO_ELEMENT_WITH_ERROR_TYPE!>buildee<!>)
+}
+
+/* REQUIRED DECLARATIONS */
+
+class Buildee<CT> {
+    fun materialize(): CT = null!!
+}
+
+fun <FT> build(
+    instructions: Buildee<FT>.() -> Unit
+): Buildee<FT> {
+    return Buildee<FT>().apply(instructions)
+}
+
+class UserKlass
diff --git a/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/InsideLocalClass.kt b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/InsideLocalClass.kt
new file mode 100644
index 00000000000..6057fc8e64c
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/InsideLocalClass.kt
@@ -0,0 +1,49 @@
+// FIR_IDENTICAL
+// CHECK_TYPE_WITH_EXACT
+
+/* TESTS */
+
+// PTV is in consuming position (yield-case)
+fun testYield() {
+    val arg: UserKlass = UserKlass()
+    val buildee = build {
+        class LocalClass {
+            init {
+                yield(arg)
+            }
+        }
+    }
+    // exact type equality check — turns unexpected compile-time behavior into red code
+    // considered to be non-user-reproducible code for the purposes of these tests
+    checkExactType<Buildee<UserKlass>>(buildee)
+}
+
+// PTV is in producing position (materialize-case)
+fun testMaterialize() {
+    fun consume(arg: UserKlass) {}
+    val buildee = build {
+        class LocalClass {
+            init {
+                consume(materialize())
+            }
+        }
+    }
+    // exact type equality check — turns unexpected compile-time behavior into red code
+    // considered to be non-user-reproducible code for the purposes of these tests
+    checkExactType<Buildee<UserKlass>>(buildee)
+}
+
+/* REQUIRED DECLARATIONS */
+
+class Buildee<CT> {
+    fun yield(arg: CT) {}
+    fun materialize(): CT = null!!
+}
+
+fun <FT> build(
+    instructions: Buildee<FT>.() -> Unit
+): Buildee<FT> {
+    return Buildee<FT>().apply(instructions)
+}
+
+class UserKlass
diff --git a/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ThroughGenericFunctionCall.kt b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ThroughGenericFunctionCall.kt
new file mode 100644
index 00000000000..c4907b823c9
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/builderInference/oneParameter/oneTypeVariable/oneTypeInfoOrigin/sourceSinkFeedContexts/ThroughGenericFunctionCall.kt
@@ -0,0 +1,43 @@
+// FIR_IDENTICAL
+// CHECK_TYPE_WITH_EXACT
+
+/* TESTS */
+
+// PTV is in consuming position (yield-case)
+fun testYield() {
+    val arg: UserKlass = UserKlass()
+    val buildee = build {
+        yield(id(arg))
+    }
+    // exact type equality check — turns unexpected compile-time behavior into red code
+    // considered to be non-user-reproducible code for the purposes of these tests
+    checkExactType<Buildee<UserKlass>>(buildee)
+}
+
+// PTV is in producing position (materialize-case)
+fun testMaterialize() {
+    fun consume(arg: UserKlass) {}
+    val buildee = build {
+        consume(id(materialize()))
+    }
+    // exact type equality check — turns unexpected compile-time behavior into red code
+    // considered to be non-user-reproducible code for the purposes of these tests
+    checkExactType<Buildee<UserKlass>>(buildee)
+}
+
+/* REQUIRED DECLARATIONS */
+
+class Buildee<CT> {
+    fun yield(arg: CT) {}
+    fun materialize(): CT = null!!
+}
+
+fun <FT> build(
+    instructions: Buildee<FT>.() -> Unit
+): Buildee<FT> {
+    return Buildee<FT>().apply(instructions)
+}
+
+class UserKlass
+
+fun <T> id(arg: T): T = arg